The Alan Katz Health Care Reform Blog

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Posts Tagged ‘eHealthinsurance’

HHS’ Technology Problem Presents a Real Opportunity

Posted by Alan on March 27, 2010

Opportunities sometimes arrive unexpectedly, usually alongside a problem. Health care reform will be no different. A problem facing the Department of Health and Human Services in implementing  a standard database of health plans brings with it an opportunity to eliminate unnecessary spending in the current system and unleash a new wave of sales innovation.

As reported by Tony Romm, writing for The Hill’s technology blog, Hillicon Valley, in less than 60 days HHS must develop a “standardized format” to present health plan information to consumers. Roughly a month later, federal officials are supposed to launch a website providing this information to consumers on a state-by-state basis. In other words, HHS has until July 1st to build what the Hill calls “a central, online health insurance information hub.” The feds will maintain the insurance information site until the states implement their insurance exchanges in 2014.

90 days is not a lot of time to build a new high-tech tool, especially for a bureaucracy like HHS – a heavy-user of technology, but not a dedicated technology organization. But building the quoting engine is the least of their worries. The tough part of the job is be coming up with a way to feed disparate data into a single platform. And when it comes to how insurance companies present their rates and benefits, “disparate” understates the case.

Today health insurance companies are free to develop rate tables in any format they desire. They also have tremendous discretion in how they describe the benefits they offer and to some extent, what benefits they describe.The Babel-esque result is that providing apple-to-apple comparisons among carriers is an extremely labor intensive, subjective task. The idea of creating a standardized information hub is designed to bring some order to this chaos.

And, fortunately, HHS doesn’t have to start from scratch. Quoting systems are a highly-evolved, well-established technology (I’ve been involved in developing more than a few over the past few decades). Several companies have already built effective small group and/or individual quoting systems in use in multiple states. Some of the best known are Connecture, eHealthinsurance, HealthConnect, Norvax, and Quotit. These firms and their competitors already do what HHS is supposed to deliver: provide consumers and their brokers information about available health plans from multiple carriers using a single interface and presenting the carriers’ distinctive information in a common format.

HHS will be hard pressed to meet their tight deadline building a quoting system from scratch. Obtaining one from an established vendor is the only way they’ll deliver what the new health care reform law demands on time.

Enter opportunity. HHS is unlikely to simply lease a third-party quoting system. Instead they will buy a system. Then they will seek to make their purchase the industry standard. One way to do that would be to make the system open source – available for anyone and everyone to build upon.

The biggest operating cost incurred by quoting system providers like those mentioned is not building the quoting technology: it’s inputting and maintaining the rate and benefit information. Each company is required to translate the unique templates and descriptions used by the carriers into a standard format. From an industry point of view this is nonsensical, especially when one realizes the eventual result is pretty much the same: a report displaying carriers’ rates and benefits.

What’s happening with quoting insurance rates is reminiscent of what occurred in the auto industry when the government required them to deploy catalytic converters. Each car company spent many millions of dollars creating a proprietary device. Yet do you know anyone who has purchased a car based on the design of its catalytic converter? Think of how much automobile manufacturers would have saved if they’d come together to create a common device. This would have freed them to compete not on an invisible commodity built into every car, but on design, price, quality and a host of other more meaningful elements.

Similarly, the quoting system vendors are spending considerable sums taking the same information and translating it into their proprietary platforms. The arrival of standard formats and of open source programming will free them to devote their energies on building what truly differentiates them: the myriad products and services they’ve built around their proprietary quoting systems. It is the case management, marketing, HR, client-communication, and other applications with which they’ve surrounded their quoting systems that makes each one unique and adds value.

These are entrepreneurial companies we’re talking about. Dollars currently spent on translating carrier information into their proprietary platforms will be diverted toward creating new ways of helping brokers assist and support their clients. Meanwhile the standards will help carriers reduce their administrative costs. By making the quoting system architecture open source other entrepreneurs could enter the field, bringing their new approaches to the market.

The Department of Health and Human Services cannot duplicate in three months what these enterprises have spent years refining. Nor should they try. Instead, HHS should quickly pick one of the current systems and establish it as the industry standard.

Will this cost-saving opportunity change the world? No. But when it comes to wringing costs out of the health insurance system, any opportunity is welcome.

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